The Gouravelli reservoir, which was proposed under the Jalayagnam project in 2007, is being built in Husnabad mandal in Karimnagar district. Initially proposed at a capacity of 1.4 tmcft (thousand million cubic feet) by late Chief Minister Y S Rajasekhar Reddy, the capacity of the reservoir was increased to 8.23 tmcft by the Telangana Rashtra Samithi, the new ruling party. The move requires an additional 1,967.18 acres of land, of which 960 acres are private land, in addition to that already acquired for the old plan.

While land acquisition is yet to be complete, the compensation process has not been up to speed with it. In fact, the compensation process for the land acquired for the old plan is still far from complete. The main contention of the affected community is two-fold. First, the government has substantially delayed the compensation process and has left the affected farmers high and dry. Second, the compensation prices being offered are much below the market price. On this account, they demand that either the compensation package should be increased to Rs 15-17 lakh per acre or the affected households should be given houses within a two kilometre radius of Husnabad with the remaining amount paid as per prevailing market rates.

The farmers have repeatedly voiced their grievance against the lack of compensation. In August 2015, unhappy with the rehabilitation and resettlement package, they tried to approach the chief minister on his visit to Gudatipalli village but could not meet him. In December 2017, villagers were 536 days into observing a relay fast demanding implementation and adherence to the Land Acquisition Act, 2013, afraid of losing land for a second time. In the same month, a _gram sabha _(Village Assembly) was held, but it was concluded abruptly without sufficiently involving the villagers.

The construction work was launched in January 2018 by Irrigation Minister Harish Rao and was followed by the Telangana high court ordering the state government in June 2018 to not displace families before providing them with resettlement and rehabilitation packages. But the order was not followed. In February 2020, the farmers protested again, blocking JCBs and lorries working on site and demanding to be compensated at least before the project was completed.

In August 2020, farmers received notices from the government stating that they have to accept Rs 8 lakh as compensation, which is less than half the market price. This forced them to file a writ petition before the high court demanding justice.

According to the Telangana High Court, those in Gouravelli village, Husnabad mandal, Karimnagar district who qualify for rehabilitation as a result of the Gouravelli Reservoir project can petition to the authorities for their advantages. Mamidi Ramesh Reddy and others filed a case alleging that their land was acquired under the 2013 Land Acquisition Act without any compensation. The government produced an affidavit demonstrating that 927 households, including the petitioners, received compensation in the form of a Rs 8 lakh one-time settlement and the rehabilitation package. The government is willing to compensate the ten relocated households that are still in existence.

On 13 June 2022, ahead of Minister Harish Rao's scheduled trial run for the Gouravelli Reservoir pump sets, the local police entered Gudatipally village and arrested protest leaders such as Shankar Reddy. At least three persons, including women, were injured during an early-morning raid. A day later, on 14 June, police resorted to baton charging the villagers after a protest at the camp office of local MLA Sathish Babu.

On 15 June 2022, Finance Minister Harish Rao assured villagers affected by the Gauravelli Reservoir project that they would not face forced eviction. He offered 200 square yards of land as compensation and said any increase in monetary compensation would require court approval. While some farmers have received compensation rates up to Rs 15–17 lakh per acre following protests and legal action, disputes persist over standard Rehabilitation and Resettlement (R&R) benefits and unresolved claims, particularly for elderly and displaced residents.

Farmers in Gudatipally who requested just compensation for their property under the Land Acquisition Act of 2013 in relation to the Gouravelli reservoir received notices from the Rehabilitation and Resettlement (R&R) authority in September 2023. About 24 farmers, who possess 54 acres, have not agreed to the acquisition of land, despite the fact that the majority of farmers in the submerging Gudatipally hamlet have. The authorities requested farmers to provide information about their land. A farmer pointed out that under the same project, a farmer in the neighbouring Karimnagar district received Rs 33 lakh as compensation for the loss of an open well during tunnel excavation, whereas in Siddipet district, the farmers were offered only Rs 4 lakh. Farmers vowed to bring the matter to the attention of the R&R authority.

Transport Minister Ponnam Prabhhakar on 21 June 2024 directed revenue officers to survey and mark the land purchased for distributary canals under the Gouravelli reservoir. In Akkannapet, Husnabad, and Koheda mandals, the Irrigation Department needs 132, 235, and 304 acres, respectively. The minister added that 95 percent of the Gouravelli reservoir's work has already been finished. He asked the officials to get National Green Tribunal (NGT) permission to complete the remaning 5 percent work.